State regulators are accepting public comments about energy-saving targets and incentives for electric utilities as part of a rulemaking required by the Efficient Use of Energy Act.
Amendments made in 2019 to the state’s Efficient Use of Energy Act required the PRC to create energy-saving targets and incentives for electric utilities that will be in effect from 2026 to 2030.
The notice of proposed rulemaking followed on suggestions made by a volunteer working group that held regular meetings throughout 2024.
The Efficient Use of Energy Act aims to establish policies that encourage utilities to focus more on energy efficiency and load management rather than increasing electric generation. This is done by the use of energy efficiency programs. For example, the Public Service Company of New Mexico offers rebates on ENERGY STAR-rated products to help customers reduce their electricity consumption.
“Energy efficiency programs establish a strong signal for customers to save electricity, which leads to lower electric system costs, reduced greenhouse gas…emissions, and positive net benefits to ratepayers,” Western Resource Advocates said in written comments submitted on May 16 to the PRC.
The New Mexico Public Regulation Commission met Thursday for a public comment hearing leading up to the rulemaking. The commission is accepting written public comments through May 30. People wishing to submit comments can email public.comment@prc.nm.gov or prc.records@prc.nm.gov and reference case 24-00157-UT.
Some of the commenters are urging the PRC to include avoided carbon emissions in the cost analysis. El Paso Electric said in submitted comments that including avoided carbon emissions in a utility cost test would “fully capture the environmental and economic benefits of energy efficiency measures that result in reduced energy consumption. This approach ensures that the true value of energy efficiency programs is recognized, promoting greater investment and implementation of such measures.”
The majority of public comments the PRC has received so far came in the form of written submissions. However, Justin Brant with the Southwest Energy Efficiency Project, or SWEEP, spoke during the Thursday hearing.
Brant expressed support for a performance incentive that is based on net benefits rather than just on spending. He said performance incentives are “one of the key policies to support utilities achieving higher energy savings.”
He said the performance incentives can do this “by allowing a utility to share some of the value achieved through its energy efficiency programs with its customers, so that customers receive the vast majority of the value, but the utility receives some of it in exchange for higher achievement.”
Brant said the current performance incentives have been in place since prior to 2019 and the utilities have earned these incentives based on weighted averaged cost of capital multiplied by its spending.
“We think this method has generally worked well up until this point, but with increased energy savings goals as a result of the 2019 EUEA modifications and changes in the electric sector, we think it’s time to update this approach,” he said.
In its submitted initial comments to the PRC, the Public Service Company of New Mexico also addressed the current performance incentives and said the “the Weighted Average Cost of Capital … no longer provides sufficient upside reward to balance out the increased downside risk to utilities that they may not meet their energy savings goals and thus receive zero profit incentive while displacing supply-side rate base and associated rate of return.”
PNM urged the commission to adopt reasonable increases in the performance incentives and said this would acknowledge market challenges and support utilities that are trying to “strive beyond baseline savings to achieve stretch goals in a high-risk market.”
As the climate changes and the demand for electricity to meet air conditioning needs increases, it could become more challenging for the utilities to meet their energy saving targets. The rulemaking also comes as utilities are facing uncertainties related to tariffs and the potential end of the federal ENERGY STAR program, which establishes efficiency standards for appliances and other products.
U.S. Sen. Martin Heinrich, D-New Mexico, joined other members of Congress in sending a letter to the administrator of the U.S. Environmental Protection Agency, Lee Zeldin, urging him not to eliminate ENERGY STAR without Congressional approval. According to the letter, “the average American household is projected to save $450 on utility bills each year simply by choosing ENERGY STAR certified products.”
